AGCO Corp (AGCO) Beats on Q2 Earnings & Sales, Initiates View
AGCO Corporation AGCO delivered second-quarter 2020 adjusted earnings per share of $1.11, down 39% year over year. The figure, however, handily beat the Zacks Consensus Estimate of 7 cents.
Including one-time items, the company reported net income of 93 cents per share in the second quarter compared with the $1.82 per share recorded in the prior-year quarter.
Revenues declined 17.2% year over year to $2,007 million in the June-end quarter. However, the revenue figure beat the Zacks Consensus Estimate of $1,743 million. Excluding unfavorable currency-translation impact of 3.9%, net sales decreased 13.2% year over year.
Operational Update
Cost of sales dropped 15.3% to $1,574 million in the second quarter from the year-earlier period. Gross profit declined 23.2% year over year to $433 million during the April-June quarter. Gross margin came in at 21.6% compared with the prior-year period’s 23.3%.
Selling, general and administrative expenses slid to $219.5 million from the year-ago quarter’s $260.7 million. Adjusted income from operations plunged 39.3% year over year to $121.2 million. Consequently, operating margin came in at 6% compared with the year-earlier quarter’s 8%.
AGCO Corporation Price, Consensus and EPS Surprise
AGCO Corporation price-consensus-eps-surprise-chart | AGCO Corporation Quote
Segment Performance
Sales in the North America segment slipped 10.2% year over year to $556 million during the April-June period. The segment reported operating income of $65 million compared with the prior-year quarter’s $51 million.
Sales in the South America segment were down 3.9% year over year to $179 million. The segment reported an operating profit of $5.5 million, as against the prior-year quarter’s operating loss of $7.1 million.
The EME (Europe/Middle East) segment’s sales came in at $1,125 million compared with the $1,457 million recorded in the year-ago period. The EME’s operating income plummeted 56.5% year over year to $91 million.
Sales in the Asia/Pacific segment were down 8% year over year to $148 million. The segment reported operating profit of $14 million compared with the year-ago quarter’s $7 million.
Financial Update
AGCO reported cash and cash equivalents of $404 million as of Jun 30, 2020, down from the $433 million recorded as of Dec 31, 2019. The company utilized $221.6 million of cash in operating activities during the first half of the current year compared with the $212.9 million in the first half of 2019.
Guidance
The company expects net sales for the current year to be between $8.3 billion and $8.4 billion, reflecting bleak end-market demand and the unfavorable impact of currency translation. Adjusted operating margins are expected to be below 2019 levels due to the impact of lower production and sales volumes, partly offset by the benefits from cost reductions. Based on these, AGCO expects adjusted earnings per share (EPS) for the current year between $3.50 and $3.75.
Global crop production remains strong and is set for another record crop year with farm operations working at normal levels. Nevertheless, consumption of grain for food, fuel and livestock feed is being negatively impacted by the economic constraints caused by the pandemic. Consequently, global industry demand for farm equipment is expected to be weaker in the remaining period of this year due to the challenging farm economics and uncertainty caused by the pandemic.
Meanwhile, replacement demand for aged fleet in the large farm, lower commodity prices and a cautious farmer sentiment are influencing farm-equipment demand. The USDA’s $16-billion COVID-19 Aid Package for U.S. farmers and livestock is also likely to offset the negative impact of lower commodity prices to some extent. Moreover, AGCO remains focused on investing in premium technology, smart farming solutions and enhanced digital capabilities for customers.
Share Price Performance
Over the past three months, AGCO’s stock has gained 33.6%, outperforming the industry’s growth of 32.6%.
Zacks Rank and Other Stocks to Consider
AGCO currently carries a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks in the Industrial Products sector include Silgan Holdings, Inc. SLGN, IIVI Incorporated IIVI and SiteOne Landscape Supply, Inc. SITE. All of these stocks sport a Zacks Rank #1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Silgan has a projected earnings growth rate of 31.5% for the current year. The company’s shares have gained 13.1% in the past three months.
IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 46% in three months’ time.
SiteOne Landscape has an expected earnings growth rate of 6.2% for 2020. The stock has surged 37% over the past three months.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Silgan Holdings Inc. (SLGN) : Free Stock Analysis Report
AGCO Corporation (AGCO) : Free Stock Analysis Report
IIVI Incorporated (IIVI) : Free Stock Analysis Report
SiteOne Landscape Supply, Inc. (SITE) : Free Stock Analysis Report
To read this article on Zacks.com click here.
